Today’s retirees must be more self-reliant than their predecessors.
Decades ago, retirement was fairly
predictable: Social Security and a pension provided much of your income, you
moved to the Sun Belt, played tennis or golf, and you lived to age 70 or 75.
To varying degrees, this was the American
retirement experience during the last few decades of the previous century.
Those days are gone; retirees must now assume greater degrees of financial
self-reliance.
There is no private-pension safety net
today. At one
time, when Social Security was paired with a pension from a lifelong employer,
a retiree could potentially enjoy a middle-class lifestyle. In January, the
average monthly Social Security benefit was $1,341. The highest possible
monthly benefit for someone retiring at Social Security’s full retirement age
in 2016 is $2,787.80, or $33,453.60 a year. So in many areas of this country,
living only on Social Security does not afford you the same lifestyle you may
have had when you were working. Elders who thought they could rely on Social
Security to get by have learned a bitter truth, one we should note. We must
supplement Social Security with other income streams or sources.1,2,3,4
We carry
more debt than our parents and grandparents did. It is much easier to
borrow money (and live on margin) than it was decades ago. Some people face the prospect of retiring with
outstanding student loans, car loans, and business loans, in addition to home
loans.3
Some of us
are retiring unmarried. With the divorce rate being where it is, some baby boomers will
retire alone. Perhaps they will share a residence with a
sibling, child, or friends; that may give them something of an economic cushion
in terms of meeting daily living costs. Then again, some married households
were single-income households in the 1970s and 1980s, but retirees managed.3
We will probably live longer than our parents did.
In 1985, the average life expectancy for a 65-year-old man in this country was
79; the average life expectancy for a 65-year-old woman was 84. Today, the
average 65-year-old man is projected to live to 91, the average 65-year-old
woman to 94. Our parents could depend on the combination of Social Security,
pension income, and fixed-income vehicles for a 10-year or 15-year retirement.
In contrast, many of us will have to try some growth investing to keep our
money growing across a probable 20-year or 30-year retirement.4
We will likely have to insure ourselves if we retire before age 65.
The national average retirement age (according to a SmartAsset study of Census
Bureau data) is now 63. With private health insurance becoming the new normal,
that means many of us will have to find some kind of private health coverage if
we retire too young to be eligible for Medicare. Furthermore, the cost of many
out-of-pocket medical expenses not covered by Medicare is certainly greater
than it once was.5
We must rise to the financial challenge retirement presents.
During the 1980s, more than 40% of U.S. private sector employees participated
in a pension plan designed to bring them eventual retirement income. In the
middle of that decade, Social Security accounted for 65% of U.S. retiree
income. Right now, 19% of private firms offer traditional pension plan programs
and Social Security represents but 27% of retiree income.4
Our retirement
will differ from that of our parents. It will likely be longer and arguably
feature a better quality of life. Every aspect of our later years may become
more comfortable, more bearable for ourselves and our loved ones. Retirement
planning is one of the most valuable tools to assist you in realizing that
goal.
This material was prepared by MarketingPro,
Inc., and does not necessarily represent the views of the presenting party, nor
their affiliates. This information has been derived from sources believed to be
accurate. Please note - investing involves risk, and past performance is no
guarantee of future results. The publisher is not engaged in rendering legal,
accounting or other professional services. If assistance is needed, the reader
is advised to engage the services of a competent professional. This information
should not be construed as investment, tax or legal advice and may not be
relied on for the purpose of avoiding any Federal tax penalty. This is neither
a solicitation nor recommendation to purchase or sell any investment or
insurance product or service, and should not be relied upon as such. All
indices are unmanaged and are not illustrative of any particular investment.
03112016-WR-1582
Citations.
1 - faq.ssa.gov/link/portal/34011/34019/Article/3736/What-is-the-average-monthly-benefit-for-a-retired-worker
[2/17/16]
2 - faq.ssa.gov/link/portal/34011/34019/Article/3735/What-is-the-maximum-Social-Security-retirement-benefit-payable
[2/18/16]
3 - blog.nsbank.com/retirement-planning-3/
[12/14/15]
4 - marketwatch.com/story/how-retirement-has-changed-in-the-last-30-years-2016-02-16
[2/16/16]
5 - smartasset.com/retirement/average-retirement-age-in-every-state
[10/28/15]